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17.

The
New American Royalty

Most
commentators missed the significance of Forbes’ 1999 issue reverently
devoted to the 400 richest persons in the United States. Sure, many
marveled that more than half (268) of the members were billionaires. And
in 1999 it required at least $625 million to be admitted to the group—a
$125 million jump over the previous year.

What
most people didn’t stop to think about, however, were the other articles
in the same Forbes issue. The
“Families” article described all the families and heirs of millionaires
who didn’t qualify as the richest 400because their fortunes were
distributed to more than one person.These family fortunes were worth
from $1.3 to $13 billion each.

The
“Near Misses” article poignantly described all those who came close to
being on the richest 400 list, but not quite. They only had a piddling
$580 to $620 million each.

The
“Drop Outs” consisted of those who used to be on the 400 list but who died
recently or suffered stock losses,or whose wealth didn’t increase fast enough for them to stay
qualified.

Nowhere
listed in this issue of Forbes
were the thousands of persons in the lesser multimillionaire class who
had achieved a somewhat less ostentatious, but still royal, lifestyle for
generations of their descendants to come.

With
monotonous repetition, The Wall
Street Journal describes in its headlines the outlandish enrichment of
corporate America’s lesser multimillionaires: “Chairman Receives Jump of
35% in Compensation” (to $2.1 million); “Paine Webber’s CEO Got
Compensation Totaling About $11 Million Last Year”; “Cendant’s Silverman
Got $27 Million in ’97 In Exercising Options”; “Paxson CEO Awards Himself
$1,875,000 Cash Bonus”; “Ex-Bank of New York Chief Received $31.5 Million
in Compensation”; “Allied Signal’s CEO Saw $23.1 Million Gain Due to Stock
Options”—and on and on, day after day.

The
real story of the 1999 Forbes’
richest-400-issue—and the Journal’s daily listing of world
class greed—is: While the real wages for most working-class Americans are
just beginning to go up relative to inflation, after more than 20 years of
stagnation or decline, our country is creating a large number of royal
dynasties of people who will never have to work, except for therapeutic
reasons, in their entire lives.

The
dark side of this uplifting scenario is that all these people will expect
working-class Americans to support them—and to provide them with their
continued wealth—for as long as they can keep their well-paid conservative
politicians in power.

Look
at Forbes’description of the “Richest
People in America,” the “Forbes 400”:

Our
billionaire ranks swelled by 79 names, to 268, making this the first year
that billionaires make up more than half the list. Together, the 400 have
a net worth of $1 trillion—greater than the gross domestic product of
China. The minimum needed to get on: $625 million, up from $500 million
last year.

Clearly, there’s no better
time to be in the three-comma club.1

In
its previous annual 400 issue, Forbes included an article that
contended that “anyone with talent and energy” can get the necessary
backing to take a shot at making a fortune. Under the head “Land of
Opportunity,” it claimed that

America
has created a system in which anyone with talent and energy has access to
the financial resources needed for success. That alone won’t lead to
fortune, but it pretty much guarantees that talented people don’t fail for
lack of capital.

Today banks, venture
capitalists, underwriters and stock brokers here don’t much care who your
grandfather was or whether you went to prep school or dropped out of
college. All they care about is: Can we make some bucks by backing this
guy (or gal)?2

A
billion dollars is one thousand
million dollars. So how does one go about getting capital to become worth
that much, or even half that much? No doubt “talent and energy” help a
lot. But inheritance counts for a lot more.

To
see the extent to which these kinds of people brought themselves up by
their own bootstraps, researchers Paul Elwood, S.M. Miller, Marc Bayard,
Tara Watson, Charles Collins and Chris Hartman analyzed the Forbes richest 400members for 1996 and
1997.3

In
“Born on Third Base,” they reported the results in baseball terms. They
found that 43.35% of the richest 400 were actually born on home plate.
They simply inherited their way onto the list.

Inheritances
also appeared to help many people “work” their way onto the list: 6.85%
were born on third base. In other words, they inherited over $50 million
to begin their journey to wealth.

Five
and three-quarter percent were born on second base, inheriting $150
million; 13.9% were born on first base, being merely upper class; and the
remaining 30.1% started in the batter’s box, having parents who did not
have “great wealth or business with more than a few
employees.”

Uneducated,
disadvantaged kids from the ghetto were mysteriously missing from the
lineup of America’s richest. And is it really true that people in the
banking industry really “don’t much care” whoyour relatives are?

To
get an idea of who gets financial and business backing, and how the rich
keep getting richer, read how Business Week answered the
question “Can Sam Walton’s Daughter Make It Big On Her
Own?”:

Rivals
claim her new investment firm, Llama, has an advantage.… Some of Alice
Walton’s rivals charge that Llama is heavy-handed in using the family’s
political and economic clout, especially to win public finance contracts.
One competitor says the company implies to potential clients that the
family or WalMart will reward them for hiring Llama. “It makes it a little
tough to compete,” says another.…

Llama was recently selected
to be the sole senior manager of a $33 million bond issue for
Fayetteville.Rivals grumble
that Llama sold fewer than a third of the bonds and paid other firms less
than the usual concession for their
help.4

Evidently,
being a billionaire gives you the right—and power—to do less work and
still make better deals with your business associates than can less
well-connected people. A cynic might also point out that, if you have six
individual family members, including yourself, listed among America’s
richest 400 persons to begin with, it’s difficult to fail. This is the
same Alice Walton who, while intoxicated, careened her Toyota 4-Runner off
a road and destroyed a gas meter and telephone box. She told a Springdale,
Arkansas officer: “You know who I am, don’t you?You know my last
name?”

In
its annual celebration of greed, Forbes often tries to demonstrate
that inheritors of millions deserve to remain members of the world’s
aristocracy—because they sweat a lot. Under the head “Young, moneyed and
driven,” we learn how commendable, though demanding, it can be to inherit
billions:

So
Dad’s worth a billion—or more. What’s that like?Some kids surely lead the jet set
rich-kid life, a la Mohamed Khashoggi, but many billionaire kids appear to
have business in the genes, sweating to persuade Dad and Mom that they are
fit to fill their shoes.

The working rich kids share
some common traits.Many have
been educated in the U.S. They’re comfortable with new technology and new
management styles.5

Surely,
working rich kids “share some common traits,” commendable ones at that.
They get first rate educations at prestigious schools; they inherit a set
of influential personal contacts (country clubs, alumni, industry
associations, political acquaintances, family friends, parents’ business
associates, and so on); they get personal role modeling in the areas of
management, finance, investment, tax avoidance and, in general, in the
whole area of wealth accumulation.

Add
a few million bucks, and you get the best financing rates from banks,
access to expert advice in technology, marketing, and finance and—even
better—if you fail at your fling in business, you just rely on the rest of
your investments to continue to live like royalty for the rest of your
life.

And
there’s the rub. America’s ridiculously wealthy, whether they work or not,
are successful or not, are a new class of royalty, with the traditional
benefits of royalty, and there is almost no way they can lose. For
America’s new aristocracy, maintaining a royal status for their
descendants—no matter what their talents, discipline, or effort—has become
a science. In “Achieving Immortality via the Family Office,” Forbes warned its readers that
“You made your money the hard way, but will your grandkids know how to
hang on to it?”:

By
establishing a family office, you hope to protect heirs yet unborn against
economic misfortune long after you are dead.…

Six generations after
Commodore Cornelius Vanderbilt made his fortune, it [half-billion dollars]
continues to grow. By pooling their money and following an aggressive
investment strategy, 43 of the descendants of the Commodore’s
great-great-grandson William A.M. Burden…remain individually and
collectively wealthy.…

Though all the Burden heirs
are wealthy, few are by themselves wealthy enough to hire the specialized
talent that the Burden office provides. “The beauty of it is, I can
cherry-pick products and hire world-class money managers unavailable to
ordinary investors,” says Jeffrey A. Weber, the 33-year-old chief
executive.6

Prior
to ClintoReaganomics, workers made decent incomes, our country had a
progressive tax system, unions had power, and everyone shared in the
benefits of technology. It wasn’t quite so automatic that descendants
without any special talents would hang on to their inherited wealth, or
even increase it.

But
that was before Republicans and conservative Democrats got control of
Congress and the presidency. Now—as long as our new American royalty can
take ruthless advantage of workers all across the globe—it has become an
automatic right of birth to remain in the
aristocracy.

With
sophisticated investment management, generations of descendants will live
like royalty long after today’s patriarch leaves his legacy. These are the
same sanctimonious hypocrites who say that requiring a decent minimum wage
for beginning workers, or giving reasonable unemployment compensation to
people who have lost their jobs, will destroy the incentive to work hard
among the common folk. Evidently, it’s a different story when
conservatives give free, unearned millions—or billions—of dollars to their
own descendants.

Two
more observations: First, the Forbes article is another
admission by the same people who want to privatize Social Security that
good investment advice (“specialized talent”) is hard to come by, even for
relatively wealthy persons.

Second,
working-class Americans should be aware that an “aggressive investment
strategy” means that investments will be made in those countries that take
the most ruthless advantage of workers. The Wall Street Journal’s following description of
“aggressive” investing leaves no doubt about the moral standards of
today’s wealthy American investors. Under its appropriate headline, “The
Haves,” the Journal gave its
vision of the future for American workers:

If
there’s one thing you can count on in the 21st century, it’s
that the rich aren’t going to just sit back and watch those fortunes
dwindle away.… For a start, they’re going to get a lot more aggressive
about the way they manage their money.…

That means the rich will be
shifting more of their funds to investments in rapidly developing nations
where returns are likely to be highest, says Richard Marin, managing
director at Bankers Trust Co.’s Private Bank in New York….

Over the coming decades,
this new group of rich people will be part of the greatest transfer of
inherited wealth in American history as the parents of baby boomers—those
born from 1946 to 1964—leave trillions of dollars to their
children.7

Mere
wealth preservation is no longer the goal of America’s wealthiest. Neither
is loyalty to this country, to its workers, to its communities, or to its
environment. It’s all about maximizing the personal wealth of oneself and
one’s descendants—no matter what injustices are perpetrated against others
in the process.

When
people invest in Third World countries with deplorable moral standards,
they know full well that they are getting richer by betraying American
workers and communities, and the environment. It’s reported daily in our
conservative financial publications.

The
transfer of wealth from one wealthy generation to another, although
massive and significant, isn’t the most important transfer of wealth. Far
more important is the preceding transfer of wealth from workers to
investors. Investors have cashed in the value that workers built into this
country prior to 1980 by selling out our industries, and using the funds
to invest overseas where workers have no protections or bargaining
power.

The
full effects of this transfer of wealth are still to come, and the
American public has yet to appreciate a simple fact: All these people are
getting locked into lifestyles that will require huge amounts of money in
the future, and that will be the subject of the next
chapter.

Aside:
Virtue and “Family Values”

To
make themselves appear more virtuous, modern conservatives have attributed
“sound family values” to themselves, and they cite divorce and the lack of
marital fidelity as major causes of poverty. They’ve even made the
single-mother-with-children the poster mom for the link between poverty
and irresponsibility.

Note
that of 1999’s richest 400 people, 72 were divorced once, 19 were divorced
twice, 5 were divorced 3 times, one was divorced four times, and one was
divorced 5 times. So much for the claim that wealth is the natural result
of solid family values, and that poverty is the result of poor family
values.

Of
course, most of the 400 are married or remarried. Being filthy rich
certainly makes one more desirable in the marriage market—even if
divorced, ugly as sin, and with ten kids. On the other hand, even an
attractive welfare mother, with just one kid, doesn’t exactly have people
standing in line to get married.

No
doubt solid family values contribute to financial well being, but they are
not the most important consideration. Political power, inherited wealth,
economic policy, education, opportunity, connections, and role models—not
a responsible sex life—are the primary determinants of who gets
rich.

As
with all large-scale social injustices, when the economic system becomes
too biased in favor of small groups of privileged people, bad things are
going to happen.

The
longer we continue to create large numbers of America’s new royal class,
the more painful any corrections will be for everyone, predators and
victims alike, when the economic system reaches its limit. And time is
getting short.